Deals Rev Pratt's Engines

Air Force Pacts Could Mean Stability For Workers, Plants

In June, the East Hartford jet engine maker announced deals worth $3.92 billion at the Paris Air Show, well over half of it for new commercial aircraft engines.

In the past two days, Pratt has won two multiyear Air Force contracts worth more than $1 billion each, the first for new and spare engines plus service for the C-17 cargo transport, the other for F-22 Raptor fighter jet engines.

Pratt, a unit of United Technologies Corp., had total sales of $11 billion in 2006.

``The jet engine business is going gangbusters,'' said Loren Thompson, a defense analyst with the Lexington Institute think tank. Pratt and competitors such as General Electric and Rolls-Royce are all beneficiaries, he said.

Heavy military spending due to the war in Iraq and U.S. military action elsewhere are driving the growth, as are the military's general interest in replacing Cold War-era fleets and a rebound in the commercial airline business.

None of that will translate to additional manufacturing jobs in Connecticut, however, Pratt spokeswoman Jennifer Arsenault said.

But the most recent Pratt contracts mean steady work for existing employees and factories, especially at the Middletown plant, where engines for the C-17 and the F-22 are assembled and tested. The plant, a major component of the state's shrunken manufacturing base, employs about 2,600 people.

On Monday, the Air Force awarded Pratt a six-year, $1.05 billion contract to supply F117 engines and engine maintenance for The Boeing Co.'s C-17, a giant cargo transport plane. On Tuesday, Pratt announced it had won a separate $1.3 billion Air Force contract to supply F119 engines for the F-22.

The C-17 can carry large military equipment, including tanks and helicopters, long distances. It is designed to land on short runways in rugged terrain. Nearly 170 are now in service with the U.S. military.

Boeing has nearly fulfilled its current deal to supply 190 of the aircraft to the Air Force and is pressuring Congress to come up with money for more. Meanwhile, Boeing is marketing the aircraft to foreign governments, including those of Canada, Great Britain and Australia.

Every C-17 Boeing sells means initial engine sales for Pratt plus years of valuable service contracts.

``These 190 planes are the workhorses of the fleet and require constant care and feeding,'' said Richard Aboulafia, a defense industry analyst with Teal Group, a Virginia consulting firm.

Pratt is also the only engine supplier for the F-22. Lockheed Martin Corp. has delivered just under 100 F-22 fighters to date of more than 130 on contract, Lockheed said. The Air Force has plans to buy more in each of the next three years.

The Joint Strike Fighter, a next-generation fighter still in development, is another project likely to keep Pratt in the money. The U.S. military expects to buy more than 2,440 of the multi-version aircraft over more than 20 years at an estimated cost approaching $300 billion. Allied governments plan to buy hundreds more of the aircraft.

``Pratt's military business looks robust forever,'' said Thompson, though an alternate engine for the Joint Strike Fighter made by General Electric could eat into Pratt's business if Congress funds the engine. The Department of Defense has tried to kill the GE engine, saying it can't afford two engines; GE's congressional allies, including Democratic Sen. Ted Kennedy of Massachusetts, have kept it alive.

In the near term, Pratt's newest Air Force contracts are unlikely to affect UTC's earnings because Pratt and UTC were probably expecting them to come through and because the revenue will be spread out over many years, said Paul Nisbet, a Rhode Island stock analyst who specializes in defense industry companies.

``They undoubtedly were anticipating it,'' said Nisbet, of JSA Research.

UTC's stock closed Tuesday at $72.97, down less than 1 percent from the previous close.